Stefan Pierer’s acquisition of Husqvarna continues to baffle me. You will note I say Pierer, and not KTM, bought Husqvarna, since the Austrian CEO used Pierer Industrie AG in the transaction as a means to help side-step European antitrust issues. After all, we can’t have Europe’s largest dirt bike manufacturer, nay largest total motorcycle manufacturer, gobbling up even more brands in the two-wheeled world. But, I digress.

For as big of an issue as it might be that KTM, by proxy, has swallowed another dirt bike brand, I still do not understand the thinking behind this madness. Dropping to four-digit yearly sales, it wasn’t until BMW started taking the off-road brand into the on-road market did signs of growth appear again at Husky.

The news is perhaps not that shocking to hear, after all the new Husqvarna street models used repurposed BMW engines, and KTM can understandably be resistant to relying on a rival manufacturer for the such a critical component. Though to be fair, they wouldn’t be the first motorcycle OEM to rely on another manufacturer for its engines, and certainly wouldn’t be the last.

The real issue though might rather have to do with the value of the Husqvarna brand and how it fits (or doesn’t fit) into KTM’s existing operations. Depending on whom you talk to, the “Plan A” school of thought is a quite popular opine, and would see Husqvarna acting as an excellent turn-key solution for KTM to add more sales to the Austrian company’s balance sheet, with Husky bikes selling alongside KTM machines, much in the same way Husaberg operates now (in its own awkward way).

There would certainly be cannibalization of sales between the brands, but since the customer dollars ultimately find their way into the same honey pot, KTM would be unfazed by this prospect and would certainly welcome the 10,000 or so extra units that Husky brings to the table.

The big challenge with Plan A though is the cost associated with running Husqvarna (something BMW knows all too well, to the tune of a reported €200 million), and its ultimate success resides in finding cross-brand efficiencies, i.e. consolidating operations.

If the numbers don’t crunch right, then Plan B is seen as a more likely outcome, and involves KTM buying Husqvarna, and shutting it down to remove competition from KTM and Husaberg. After all, the customer overlap in the high-end off-road market falls almost completely to these three brands alone, and a lost Husqvarna sale almost certainly means a KTM or Husaberg sale instead. The EU antitrust officials might wake up from such a move though, but you never know.

If those were the two options on the table, Husqvarna’s fate could very well reside with the accountants, who have so far signaled their intention to bring Husqvarna operations up to Mattighofen, and layoff almost all of the staff in Varese.

Although the Italians seem resistant to the change, there seems to be little to stop KTM from leaving only a small design and marketing squad behind in Varese, while production moves to Austria. That would leave a nice asset, read: factory, for KTM to sell, but that is a completely different rumor and animal to explore later.

Back on task, now that KTM is beginning to realize that things on the ground in Italy are far worse than what BMW Motorrad lead them to believe, one has to wonder if Pierer is rethinking his plans for Husqvarna. While the CEO has made every overture for a Plan A integration, it might be just as easy for KTM to abort Husqvarna and go with Plan B.

No matter which outcome works its way to the top, the Husqvarna brand seems destined for some work in developing markets, which loyal Husky enthusiasts will likely understand to mean complete dilution of the Husqvarna brand as we know it — Benelli owners know what I mean here.

However, KTM has shown itself to be astute at making premium motorbikes in countries like India, so much so that we are still hopping, wanting, wishing, praying for the Bajaj-built KTM 390 Duke to come to American soil.

The only option left undiscussed on the table? Plan C, which is could also be called “the last-ditch effort by BMW” plan. Building out Husqvarna into a stout off-round and on-road brand, KTM would have to make a major investment of time, resources, and money in Husqvarna as both of these major segments are in dire need of reworking.

With KTM AG already struggling with this same process in its core asset, the KTM brand, Plan C is an unlikely option, but still an appealing one for consumers. Who wouldn’t like to see the Husqvarna Moab come to reality? For the Nuda though, it’s so long, and thanks for all the fish. We hardly knew thee.

The Nuda and other on road bikes are DIRECT competition for KTM road models.
Most notably the 690 and 990cc bikes.

To develop the Nuda in the future is to take away KTM sales as they are the same buyers, looking for an exotic european streetfighter road bike.

Mike Lewis

Maybe we can console ourselves with the prospect of a KTM chainsaw.

good dog

What about Plan D?

Where in Pierer Industrie AG trades the existing KTM stock that Bajaj Auto (worlds largest manufacturer of motorcycles is their claim) owns for Husqvarna shares (maybe more) and an agreement (or not) that KTM develops motors for the Bajaj/Husqvarna company, built in Bajaj’s India factories. That gives Bajaj the opportunity to own a recognizable marque that can be sold around the world and develop it with KTM’s assistance (or not) .

Pierer Industrie AG eventually sells/trades back the shares to KTM for an unknown entity. KTM had quite the concern when Bajaj began gobbling up the stock (currently they own 47%) and Bajaj would have likely been able to leverage the buyout of further shares, not held by KTM. There’s nothing wrong with Bajaj’s business sense, having made much building bikes for decades in India and may still have a relationship with Kawasaki for rickshaw motors as they had provided previously.
An agreement could even be made to produce additional KTM’s at Bajaj’s facilities to meet worldwide demand should it be necessary(they already have a rebadged KTM 200 Duke as an agreement).
KTM then has a formable competitor, depending on how Bajaj develops Husqvarna and enters the world market with a highly respectable brand.

Gritboy

Proving yet again there are some really short-sighted financiers and developers in the moto world to have invested and over-produced only to sell off and close shops. But as you said Jensen, this was probably all to side-step EU anti-trust laws, so I’m sure they’re all laughing to the bank while the Husqvarna builders are put out to pasture.

sideswipe

How about a Honda instead? In 5, 10, heck even 20 years you can still get parts for your bike from a company called Honda.

Halfie30

@ good dog: Genius!

smiler

Kill the production and give the Indian company a brand to use. Kills off a competitor to KTM’s road bikes and supports their new production partner?

paulus – Thailand

I think ‘smiler’ has the most probably scenario….
A way to have an internationally recognised brand name to use in developing nations.
Not to sour the ‘KTM’ image and price point.

paulus – Thailand

Wasn’t there still 12,000 (2012) and 3,000-4,000 (2013) inventory bike still there?
These will have to be ‘repurposed’ somewhere.

good dog

I’m going to continue on my opinion that the Bajaj Auto shares of KTM trade for Husqvarna from Pierer Industrie AG would be best for KTM.

I’m next to sure that ‘legalese’ work is being done on part of Pierer Industrie AG and BMW to sort out the financials on the unsold inventory if it was not properly represented and calculated. BMW might have to eventually absorb that loss themselves or adjust the purchase price, all the better for PI-AG.

There would also be agreements with BMW as part of the sale to PI-AG to provide parts and spares on product BMW developed for an unknown number of years that could easily be transferred to Bajaj so a none issue providing parts if either decide to sell the unsold inventory, even at a loss, they may make some of it back in parts sales to new and existing customers. There does not appear to be the same legal requirements at least in North America motorcycle industry to have to provide parts for discontinued models as the automotive manufacturers are required to do (I think it is 7 years for them), although most motorcycle manufacturers tend to do a decent job a keeping some supply going. I would have to agree that Honda is the best at providing parts for older models, but some parts are just going to be not available.

I don’t think there can be any concerns about being competition if a trade/purchase of Husqvarna went through, (think of developing brand loyalty) if KTM does not help Bajaj develop new models (dirt/street/adventure??), then someone else will or they will go it alone (they have the resources $$$) . And I think a joint development deal is the way to go if this is Pierer’s train of thought.

Owning the rights to a highly recognized brand such as Husqvarna is worth much more than one would assume. Having that brand continue to produce new models is worth even more if done correctly. Even blowing out the remaining inventories makes the brand available. These Indian companies are not just interested in developing countries and small displacement models anymore. India’s Hero motorcycle companies recent investment in Eric Buell’s company to develop and build larger displacement models from their India based factories is another signal that a new wave of manufacturers are coming.

BMW in my opinion over-anticipated market demand when they resurrected the brand to cool reviews of the Husky’s new clothes, throw-in a declining economy and what were basically dirt bikes and street-able versions of the same (already a small % market in some locales) and there’s a possible reason for much of the unsold inventory.

As I said, I’m going to to stick with the trade for stock scenario involving Bajaj Auto and Pierer Industrie AG if the deal can benefit BA. It’s not uncommon for companies to eventually buy back existing shares from shareholders once they are on better financial ground. At 47% shares held by BA, that can seriously have an effect on KTM direction. You have to listen to your shareholders! Even minority share holders can easily/legally upset the management structures giving the minority owners more say than we can imagine. Having Pierer Industrie AG eventually own the KTM shares sold/traded to them by Bajaj for Husqvarna, probably wouldn’t be in conflict. They could then either hold the shares or offer them up for sale when KTM was able to afford the purchase or take loans out to buy-back, of course they would have to be put up for sale to anyone, but legally binding deals can be made in advance to sell the shares to KTM.

Think about Ducati’s turn-around by an investment and restructuring by Texas-Pacific Group many years ago. Ducati was able to do what it could not do itself or with the help of previous investors. They built new brand interest and loyalty on a waning brand. They turned losses into profits in very little time and eventually sold their shares (estimated at 85%) making lots of money all along, to three other investment groups who then sold out to Audi for even bigger bucks and still the brand soldiers on.

See there is hope for Husqvarna!! But it is going to be made by business that hopefully recognizes brand marketing and loyalty. (Sorry for the long winded rant again)

Marc F

The Stradas especially are a golden opportunity for KTM to expand it’s brand footprint to include “value” models, beyond it’s current “performance” brand. It’s a shame to do such with a brand like Husky that has such a rich racing heritage, but it opens up huge doors for KTM to drop pricing (and running gear quality) to take a bite out of the dual sport space (i.e. CRF250L through KLR650) without risking their ready-to-race purity. The Nuda unfortunately was Husky/BMWs attempt to grab the emerging sport naked space, which is exactly where KTM sees themselves growing. I could see a 900 I2 slotting in nicely between the LC4 and the increasing monstrous (1200cc?!?) V-twin, but it would make a lot more sense under the KTM brand.

Jonathan

“Who wouldn’t like to see the Husqvarna Moab come to reality?”

That would be me.

Aside from the fact that it looks exactly what one would expect from a bunch of acid-tripping Germans there’s the fact that the only thing going for any of the 650 range was price – and market share does not necessarily equate to profit, especially when you’re paying Euro prices to build them. It could also be argued that putting out a range of fugly utilitarian roadbikes won’t encourage anyone to buy the competition dirtbikes that are your core business.

The comparison with Ducati is an interesting one, good dog, but it doesn’t really stand up for me because the premium roadbike sector is a lot healthier (in terms of sales and technological advancement) than the dirtbike sector. Offroad just isn’t an attractive market and hasn’t been ever since the entire industry decided that what we really needed were fragile, unreliable, under developed thumpers that just don’t seem to get any better from one season to the next…

A couple of guys who have been around Huskies far longer than me have argued that Husky was too big to be focussed and responsive to the needs of their niche, but too small to benefit from economies of scale. There’s also the additional problem that (in the USA at least) they became primarily a cut price brand. Why pay full dollar for this year’s bike when you can pick up last year’s leftovers for peanuts? Husky became synonymous with cheap, which is unfair, but it’s a very hard cycle to break.

paulus – Thailand

12 february 2013
KTM CEO Stefan Pierer has announced the Austrian manufacturer’s intention to begin producing and selling Husqvarna motorcycles in India within two years.

In an interview with Indian radio station CNBC-TV18, the Pierer said: ‘Maybe in two years time we will see the first Husky models coming from the Chakan production line.

‘Also to use the joint engine platforms of Bajaj/KTM also for the Husqvarna for 125/200, so that Husqvarna is also able to enter one or the other emerging markets,’